Differential Targeting of the Forum in Jurisdictional Analysis

By Open Grid Scheduler/Grid Engine, CC0 1.0

The doctrine of “effects” jurisdiction permits a court to exercise personal jurisdiction over a non-resident defendant when the defendant’s activity outside the forum causes harm within it. It is frequently used in e-commerce cases in which a defendant’s website is accessed by consumers nationwide (or indeed globally). One of the elements necessary to establish jurisdiction on this basis is that the defendant’s out-of-state activity was “expressly aimed” at the forum. In e-commerce cases, some courts have read that to require differential or specific targeting of the forum—in other words, a showing that the defendant took special steps to serve the market there rather than just seeking to serve all markets anywhere.

In an e-commerce case last year involving Shopify, the Ninth Circuit, sitting en banc, reversed course on the question of “differential targeting.” Overruling a 2020 decision, it held that in claims based on the in-forum effects of a nationwide e-commerce business, plaintiffs did not need to establish that the activity had a particular forum-specific focus or otherwise differentially targeted the forum.

This topic is worth attention in part because a circuit split seems to be developing on this issue: the Third Circuit (citing the Ninth Circuit’s now-overruled 2020 case in support of its reasoning) has adopted a differential targeting requirement in effects cases.

Background: The Calder Test for Effects Jurisdiction

In Calder v. Jones (1984), the Supreme Court considered a libel claim brought in California by Jones, an actress who lived and worked in that state, against the National Enquirer, a Florida corporation. Although the defendant’s allegedly tortious activities occurred outside California, the Court reasoned that they were purposefully directed toward the forum, where Jones would suffer the brunt of the injury. Under those circumstances, the Court held, the exercise of personal jurisdiction was proper despite the lack of physical contacts with the forum state.

This effects test requires plaintiffs to show: (1) that the defendant committed an intentional act, (2) that the act was expressly aimed at the forum state, and (3) that the act caused harm in the forum. Plaintiffs frequently rely on it when bringing e-commerce claims, since websites often serve customers in locations where the website operators are not physically present.

Briskin v. Shopify

Shopify is an e-commerce platform that supplies merchants with the software and infrastructure needed to process online sales. In the process of collecting and validating a consumer’s online payment, Shopify accesses and stores personally identifiable data regarding that consumer. Briskin, a California resident, filed a putative class action in the Northern District of California asserting privacy-related tort claims against three Shopify entities (Shopify Inc., a Canadian company, and two of its U.S. subsidiaries). The district court concluded that it lacked personal jurisdiction over these entities. That ruling was upheld by a three-judge panel of the Ninth Circuit Court of Appeals but subsequently reversed after rehearing en banc.

At all stages of the litigation, the parties appear to have agreed that the first and third elements of the Calder test were met. Shopify’s actions in the regular course of its business were intentional, and Shopify “[knew those actions would] cause harm to California consumers by violating the very laws that the California legislature has enacted” to protect those consumers. The dispute turned on the second element: whether Shopify’s actions were “expressly aimed” at California.

One argument Shopify made was based on the Supreme Court’s holding in Walden v. Fiore (2014), which clarified that the defendant’s own conduct, not unilateral action by the plaintiff or another party, must create the in-forum effect. Shopify argued that its connection with California was “happenstance arising from the California consumers’ choice to do business with a merchant that has contracted with Shopify.” The court rejected this argument, concluding that Shopify’s knowing interception of data from California consumers for commercial gain satisfied this part of the test.

The more interesting argument involved the concept of differential targeting. Shopify argued that it operated nationwide and was thus “agnostic” as to the location of particular consumers. In that light, its activities had no “forum-specific” focus and could not be said to have expressly aimed at California.

In making this argument, Shopify relied on the Ninth Circuit’s 2020 opinion in AMA Multimedia v. Wanat. There the court had considered intellectual property infringement and unfair competition claims against the Polish operator of ePorner, an adult video website. (Under Rule 4(k)(2), the court considered contacts with the United States as a whole.) Nearly 20% of ePorner’s customers were based in the United States, and defendant Wanat had contracted with a U.S. domain server in order to facilitate access to the site by U.S. users. Nevertheless, the court had concluded, Wanat’s intentional acts were not “expressly aimed” at the United States.

Stating that “the market for adult content is global,” the court reasoned that Wanat’s activity did not in any way specifically target the U.S. audience in ways that it did not target other markets. In other words, ePorner sought viewers wherever it could find them, without taking special action to solicit U.S. viewers. In sum, the United States was not the “focal point” of the website, and thus Wanat’s activity had not been expressly aimed there.

In Shopify, the court overruled AMA Multimedia, concluding that the opinion there had misrelied on other precedent in imposing the requirement of a forum-specific focus. It held that “an interactive platform ‘expressly aims’ its wrongful conduct toward a [forum] when its contacts are its “own choice and not ‘random, isolated, or fortuitous,’’’ even if that platform cultivates a ‘nationwide audience for commercial gain.’” As it stated,

requiring differential targeting would have the perverse effect of allowing a corporation to direct its activities toward all 50 states yet to escape specific personal jurisdiction in each of those states for claims arising from or relating to their relevant contacts in the forum state that injure that state’s residents.

Having concluded that Shopify engaged in purposeful business activity directed to California, the court addressed Shopify’s argument that the exercise of jurisdiction would nevertheless be unfair in that it “could lead to specific jurisdiction in all 50 states.” The court was not persuaded. First, it said, that might not be true, depending on whether all other states had protective legislation like the California laws Shopify allegedly violated. Second, even if true, it would not be unfair “if the contacts Shopify makes in all 50 states are like its California contacts”—presumably referring to the scope of its market in California.

Potential Circuit Split

Differential targeting appears to have been considered most frequently by courts in the Ninth Circuit. However, the Third Circuit has also addressed the question of forum-specific focus under the effects test for jurisdiction—citing the now-overruled AMA Multimedia case in support of its conclusion.

In Hasson v. FullStory Inc., the court considered two related claims arising out of data surveillance. One of them was brought against Papa Johns, the nationwide pizza chain, which had deployed code developed by FullStory on its website to collect information from visitors to the site. The plaintiff, a Pennsylvania resident, alleged that this activity violated Pennsylvania law on wiretapping and invasion of privacy. As the court noted, he did not allege that the Papa Johns website was accessible only in Pennsylvania, that the code was deployed only when users accessed the site from Pennsylvania, or that the website’s content was tailored in any particular way to Pennsylvania viewers.

Citing AMA Multimedia’s observation that the market for adult content is global, the Third Circuit noted that the market for pizza is national. In the absence of some specific activity tailored to Pennsylvania, it held, the plaintiff had not established that Papa Johns had “expressly aimed” its activity toward that forum.

Lower courts within the Third Circuit have since adopted this approach as well—including in claims outside the specific context of e-commerce. In antitrust litigation against foreign fragrance producers, for instance, the District Court for the District of New Jersey considered allegations that the defendants had conspired to affect U.S. markets. Following Hasson, it stated that “the effects test is not satisfied where the effects of globally targeted conduct are felt in the forum.” In other words, the court suggests, participation in a price-fixing conspiracy intended to affect markets worldwide would not necessarily be sufficient to satisfy the effects test for personal jurisdiction in claims brought by U.S. purchasers for resulting harm.

Conclusion

As the Ninth Circuit noted in Briskin v. Shopify, the “geographic scope of [a company’s] commercial ambitions” may be national (or global), rather than limited to a specific forum. Nevertheless, when the scope and scale of a company’s market within the forum indicates that the market is being exploited for commercial gain, and when the company’s activity causes harm there, it is hard to see why the fact that the company is active in other markets too should preclude the exercise of jurisdiction. This is particularly true in cases—like all of the cases discussed above—that involve the violation of the forum’s regulatory law.